New NHRA owners fire up marketing plan

The new owners of the
NHRA Pro Racing division didn’t shy away from comparisons to the NASCAR model
last week while announcing their $121 million acquisition.

HD Partners Acquisition
Corp., a group of former DirecTV executives who raised $150 million from
investors to pursue a sports entertainment property, acknowledged a desire to
emulate NASCAR’s marketing success by filling more sponsorship categories and
increasing the NHRA’s licensing revenue.

The NHRA will no longer have to reinvest its
Powerade Series profits into the amateur ranks.

The first step likely
will include expansion of the Powerade Series’ 23-race schedule with an eye on
moving into Canada and/or Mexico in the not-too-distant future. In the next
three to five years, the NHRA hopes to add at least three new events, possibly
more.

HD Partners said it will
use the excess capital of about $30 million to pursue other acquisitions that
would be ancillary to NHRA Pro Racing.

“NASCAR did not become
what it is today because the racing evolved. They’ve been driving around in
circles for 50 years,” said Eddy Hartenstein, CEO of HD Partners and the former
president of DirecTV. “It grew because of how they marketed the sport. That’s
our opportunity.”

With the acquisition,
the NHRA Pro Racing division will break away into a separate entity from the
association’s amateur side, which consists of 80,000 members and 35,000
licensed competitors.

HD Partners bought all
of the assets that go with the Powerade Series, including the contract with
ESPN that goes through 2011, a perpetual license to the NHRA brand, sponsorship
and licensing rights, media rights, merchandise rights related to the brand and
four tracks, as well as a long-term lease to a fifth.

HD Partners paid $100
million in cash, $9.5 million in HDP common stock and assumed $11.5 million in
NHRA debt. The money was paid to the NHRA, which maintains sanctioning duties,
such as safety.

The NHRA is a nonprofit
organization, but the sale means the Powerade Series will go public as part of
HD Partners. The essential benefit to the move is that the NHRA will no longer
have to reinvest its profits from the Powerade Series into the amateur side of
the association.

Under the old model, the
NHRA had experienced revenue growth in recent years, going from $82 million in
2004 to $93 million in 2006. Nearly half of that revenue comes from admissions,
a revenue line that grew from $41 million to $46 million from 2004 to 2006.

The
NHRA’s sponsorship and licensing revenue remains underdeveloped, though, and
those are areas Hartenstein and his team will target, he said. Hartenstein
cited categories such as wireless, satellite TV, consumer-packaged goods,
big-box electronics and quick-service restaurants as obvious areas for growth.
NHRA’s nonendemic partners include UPS, Brut, Budweiser, U.S. Army, AAA, Oakley
and Motel 6.

He also said that
NASCAR-branded products generated license fees of more than $300 million in
2005, pointing out another opportunity for the NHRA to have revenue surge. NHRA
showed revenue of $7 million last year in royalties.

The series will revamp
and relaunch its licensing efforts, offer more merchandise through its Web
site, NHRA.com, and establish a presence in retail outlets. The series also
will relaunch NHRA.com.

“As a property, the NHRA
has been very successful in an under-the-radar way,” said Tim Frost, a
financial analyst and consultant in motorsports. “This is going to raise a lot
of eyebrows.”

The sale is subject to
regulatory approval. Frost said when an entity goes from nonprofit to public, it
often undergoes review by the state attorney general’s office.